I love the ease with which marketing-guru Seth Godin communicates vital concepts. In a recent blog A Paradox of Expectations he writes: Better than expected might be the level of quality that’s necessary to succeed. Of course, once that becomes the standard, the expectation is reset. The basis of competition has shifted to business models because features and benefits of individual products and services have become so easy to copy. But even business model value promises are subject to the Paradox of Expectations. So how does a leader stay ahead of the commoditization curve? Follow my Ten Commandments for staying out of commodity market quicksand. They form the epilogue of my book about business model innovation, Beyond Price: Differentiate Your Company in Ways that Really Matter. Practice these behaviors in the next year and you’ll better fulfill your unique and highest value role…
Innovation Makes Google a Leader
Innovation is to this century what quality and efficiency were to the second half of the last century – the dominant focus organizations adopted to improve business results. From a macroeconomic perspective, the shift is welcomed. We need new-to-market industries and jobs to replace those lost to the decades-long, relentless, job-destroying drive for reducing waste and increasing efficiency. But a commitment to innovation and successful innovation can be miles apart. How can leaders best bridge the divide? Marissa Mayer, senior leader of Google’s search business and one of the company’s longest tenured employees, shared her company’s innovation formula at the University of Wisconsin Madison’s E-Business Consortium’s 2010 Business Best Practices & Emerging Technologies Conference. Founded in 1998, the UWEBC brings together leading Wisconsin companies to focus on thought leadership, business best practices and emerging technologies related to E-commerce. Each year, the UWEBC provides…
Does Carly Fiorina’s HP legacy foreshadow her Senate leadership?
It seems natural to judge a political candidate by her previous work performance, which is precisely why my eyes are on the California Senate race. Former HP CEO Carley Fiorina is challenging the incumbent democrat, US Senator Barbara Boxer, to represent the financially strapped state. While the two women trade public policy barbs, HP shareholders are debating whether to dump HP stock. From my perspective, the seeds for HP’s current problems were planted from 1999-2005 during Fiorina’s tenure as CEO of HP. (Disclosure: I vote in Wisconsin. I am an independent and have voted for both parties.) Before her forced exit, Fiorina changed HP in two ways that each demanded significant internal focus. First, she reorganized the company, a reorganization that Mark Hurd who followed Fiorina spent time dismantling, as it diffused responsibility for organic growth and delayed decisions. (Hurd’s reorganization cut out…
Smart strategy challenges conventional thinking
Read any business magazine and you’ll discover a multitude of examples of companies that secured profitable, growing market positions because their visionary leaders challenged the conventional rules of how an industry works. The leaders’ fresh perspectives resulted in winning business model innovations in industry after industry. Netflix ousts Blockbuster. Starbucks creates a rapidly growing revenue engine that every local coffee shop missed and is poised to steal share from bland-tasting Maxwell House and Nescafé on grocery store shelves. Amazon disrupts not just booksellers Barnes & Noble and Borders, but also Target and Walmart, with its no-bricks-and-mortar business model strategy. All too often leaders of established businesses act like horses pulling carriages in New York City’s Central Park, wearing blinders to avoid distractions. Which brings me, a political independent, to the narrow thinking of Wisconsin’s Republican Gubernatorial candidates on high-speed rail transit connecting Milwaukee,…
Intuition Advances Business Model Strategy
A National Public Radio story this week concerned Ludo Lefebvre, a successful Los Angeles chef who got cold feet after leaving established restaurants to create his own. With two Mobil 5-star ratings on his resume, $2 million in investor support and a weariness from working for bosses, why did Lefebvre change his plans? His gut told him to do something very different, something that has turned out to be a huge winner in the highly competitive LA restaurant scene. Instinct is an important ingredient in business model strategy decisions. A winning business model strategy addresses a multitude of questions with answers that fit together seamlessly to carve out a unique space, a task that is very challenging in increasingly cluttered and mature markets. According to New York Times bestselling author Jonah Lehrer in How We Decide, instinct emerges from the part of our…
Trends That Should Shape Business Model Strategy
In the 1980s I had the privilege of working closely with consultants from McKinsey & Company, strategy partners to many Fortune 1000 firms and global non-profits. McKinsey’s value promise in a nutshell is, “We’ll help you reshape your industry to your advantage.” McKinsey recently released a report on mega-trends that will shape markets. It’s essential reading for leaders of businesses of any size as they evaluate their organization’s business model strategy. In today’s economy, “status quo” is any company’s weakest strategic direction as the world is changing more rapidly and unpredictably. While forecasting the future is impossible, understanding dynamic trends and their implications for your organization’s risks and opportunities is paramount for making solid business model strategy decisions. In McKinsey’s words: “Managers must also gain an understanding of deep external forces and the narrower trends they can unleash. In our experience, if senior…
Apple’s Business Model Lesson
The blogosphere is aflutter with talk on Apple’s recent customer satisfaction issues linked to the new iPhone 4’s antenna design. A quiet whisper turned into thunderous noise once Consumer Reports decided to not recommend the phone because calls are dropped if the antenna is covered while in use (for example, by the user’s hand holding the phone). Much of the on-line conversation centers on public relations lessons and a debate about the sensitivity issues of the iPhone versus competitive products. (For a good assessment of the PR lessons for Apple, see The Leadership Playlist blog.) There is more to this lesson than public relations. I think in terms of business model and strategic leadership, and I believe Jobs ignored Apple’s business model in resolving an internal debate about the antenna, a product design decision that I’m confident Jobs now regrets. Apple’s value promise…
Borders Books Needs More than Branding
Borders Group, the struggling bookseller, has a new Chairman of the Board, Bennett LeBow. LeBow’s a member of Vector Group Ltd., the investor group that recently acquired 15% of Borders (35% if warrants are exercised). According to interim Borders CEO Mike Edwards, LeBow “will play an extremely important role in helping us redefine the Borders brand.” Will a new brand image change the landscape? Perhaps on the margin, but Borders needs more than marginal change. Borders needs a new business model not just a new brand. Otherwise, change will consist solely of the smoke and mirrors of advertising rather than the real transformation required to win a profitable share of the market. As a Borders lover, I’d hate to see LeBow follow in the footsteps of other leaders who foolishly and tragically banked their hopes on a new brand alone. Let’s face it….
If you can’t beat price, stop trying.
The loss was set in motion years ago. Still, it was hard to see my favorite airline, Midwest Express, lose the last vestige of its identity today, its name. It’s recent acquirer, Republic Airlines, also owns Frontier airlines. Republic wisely decided it could not afford to invest in two brands and Frontier better defines the combined companies. “The best care in the air,” Midwest’s brand promise, was not spin. First-class sized seats, food you’d enjoy on land and friendly service, complete with freshly baked and still warm chocolate chip cookies garnered industry awards year after year. An airline started by a corporation understood how frustrating business travel is and found a solution for frequent travelers. In every industry there are new entrants and established players driving the market lower in terms of prices and oftentimes (as in airlines) benefits. If you lack the…
“Better Late than Never” Is a Risky Bet in Business Model Innovation
Blockbuster, the largest retail chain for renting and buying videos, is scrambling. Watching movies at home has become as natural as watching TV shows, and internet speed is steadily increasing. The two forces have created new opportunities for connecting viewers with the videos they want to see. New industry entrants grabbed these opportunities as new entrants always do. After all, why go after a leader where the leader is strongest? Netflix provides movies on-line and by mail, with an Amazon-like artificial intelligence that helps to inform a member’s choices. Redbox offers dollar rentals in kiosks located in grocery stores, a disruptive business model innovation that captures spur of the moment purchase decisions. Both business models increase convenience. Still other kiosk competitors exist. U Flick, a start-up in Madison, Wisconsin, for example, places kiosks on college campuses. The niche succeeds because they’ll offer films…